Correlation Between Oceanic Beverages and Tai Tung

Can any of the company-specific risk be diversified away by investing in both Oceanic Beverages and Tai Tung at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Oceanic Beverages and Tai Tung into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Oceanic Beverages Co and Tai Tung Communication, you can compare the effects of market volatilities on Oceanic Beverages and Tai Tung and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Oceanic Beverages with a short position of Tai Tung. Check out your portfolio center. Please also check ongoing floating volatility patterns of Oceanic Beverages and Tai Tung.

Diversification Opportunities for Oceanic Beverages and Tai Tung

0.02

Correlation Coefficient

Oceanic Beverages  Tai Tung

Significant diversification

The 3 months correlation between Oceanic and Tai is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Oceanic Beverages Co and Tai Tung Communication in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tai Tung Communication and Oceanic Beverages is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Oceanic Beverages Co are associated (or correlated) with Tai Tung. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tai Tung Communication has no effect on the direction of Oceanic Beverages i.e., Oceanic Beverages and Tai Tung go up and down completely randomly.

Pair Corralation between Oceanic Beverages and Tai Tung

Assuming the 90 days trading horizon Oceanic Beverages Co is expected to under-perform the Tai Tung. In addition to that, Oceanic Beverages is 1.9 times more volatile than Tai Tung Communication. It trades about -0.06 of its total potential returns per unit of risk. Tai Tung Communication is currently generating about -0.02 per unit of volatility. If you would invest  2,430  in Tai Tung Communication on December 30, 2024 and sell it today you would lose (50.00) from holding Tai Tung Communication or give up 2.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Oceanic Beverages Co  vs.  Tai Tung Communication

Oceanic Beverages

Risk-Adjusted Performance

Very Weak

Over the last 90 days Oceanic Beverages Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest abnormal performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Tai Tung Communication

Risk-Adjusted Performance

Very Weak

Over the last 90 days Tai Tung Communication has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Tai Tung is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Oceanic Beverages and Tai Tung

The main advantage of trading using opposite Oceanic Beverages and Tai Tung positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Oceanic Beverages position performs unexpectedly, Tai Tung can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Tai Tung will offset losses from the drop in Tai Tung's long position.

The idea behind Oceanic Beverages Co and Tai Tung Communication pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.